Hong Kong Troubles Weigh on Luk Fook

RAPAPORT… Luk Fook’s sales fell 20% in the first fiscal half amid
uncertainty in the Hong Kong market and the rising price of gold.



Total sales dropped to HKD 6.31 billion ($805.5 million) in
the six months ending September 30. Profit for the period slipped 26% to HKD
497.3 million ($63.5 million).


Same-store sales — at Luk Fook outlets open for more than a
year — in Hong Kong and Macau slid 25% in the six months ending September 30, excluding franchises.
Same-store gold sales plunged 34%, while gem-set jewelry purchases declined
10%. 


The decline was the “result of a relatively high base,
strong gold prices, and the continuing impact of Hong Kong social incidents and [the] US-China trade war on market sentiment,” the company noted. “Consumption
expenditure per capita in the Hong Kong and Macau market has been weakening,
[causing a] substantial decline in the number of visitors to Hong Kong. The
overall retail atmosphere has been weakening continuously in recent months.”


Overall same-store sales in mainland China slipped 16%, with
revenue from gold products falling 17%, and gem-set jewelry dropping 12%.

The number of visitor arrivals in Hong Kong decreased considerably in July, August and September, with numbers down 5%, 39% and 34% for each month, respectively. In the first half of the year, arrivals increased 14%, according to
the Hong Kong Tourism Board.


At the end of the first half, Luk Fook had 210 self-operated
stores, of which 136 were in mainland China, 51 in Hong Kong, 12 in Macau, and
11 in other locations. The retailer also has 1,747 licensed shops.



Image: A Luk Fook store in Hong Kong. (Luk Fook)